#supervision – Federal Financial Analytics

22 05, 2023

M052223

Eliza Allen2023-05-22T11:47:38-04:00May 22nd, 2023|6- Client Memo|

How to Ensure That Independent Study of Regulatory Mistakes Leads to Near-Term, Meaningful Redress and Reform

Last week, a moderate Senate Democrat was joined by a Republican in yet another letter demanding an independent investigation of regulatory actions related to recent bank failures. But, as the absence of specifics in any of these letters makes clear, it’s a lot easier to call for independent inquiry than to lay out how to conduct one that might make a meaningful difference. Precedent is not encouraging – for example, Congress created a Financial Crisis Inquiry Commission after 2008, but it was an unqualified waste of time and money. Still, we urgently need an independent assessment of what went so wrong combined with another providing near-term, actionable reforms. Having served on one post-crisis national commission that did a bit of good, I recommend separating the forensic inquiry from the one focused on the future, guarding against conflicts without eliminating expertise, and assessing only a few clear questions suitable for practical answers that can be readily accomplished under current law.

M052223.pdf…

22 05, 2023

Karen Petrou: How to Ensure That Independent Study of Regulatory Mistakes Leads to Near-Term, Meaningful Redress and Reform

Eliza Allen2023-05-22T11:47:33-04:00May 22nd, 2023|The Vault|

Last week, a moderate Senate Democrat was joined by a Republican in yet another letter demanding an independent investigation of regulatory actions related to recent bank failures. But, as the absence of specifics in any of these letters makes clear, it’s a lot easier to call for independent inquiry than to lay out how to conduct one that might make a meaningful difference. Precedent is not encouraging – for example, Congress created a Financial Crisis Inquiry Commission after 2008, but it was an unqualified waste of time and money. Still, we urgently need an independent assessment of what went so wrong combined with another providing near-term, actionable reforms. Having served on one post-crisis national commission that did a bit of good, I recommend separating the forensic inquiry from the one focused on the future, guarding against conflicts without eliminating expertise, and assessing only a few clear questions suitable for practical answers that can be readily accomplished under current law.

The first decision point determines all the rest: whether the independent analysis is to be forensic – who dropped which heavy ball on whose toes – or focused on the future – what we learned and what to do about it. Many of the proposals for an independent commission, including the Congressional letter noted above, want their commission to do both, but none could do so well and asking for this is thus asking for trouble.

A good forensic analysis will reduce the moral hazard enjoyed by federal supervisors long exempt …

18 05, 2023

REFORM226

William Cross2023-05-18T16:16:02-04:00May 18th, 2023|5- Client Report|

Federal Regulators Lose Ground as Senate Banking Reviews Recent Failures

Describing the CEOs’ statements at his last hearing as “the dog-ate-my-homework” excuses for grievous failings, Senate Banking Committee Chairman Brown (D-OH) also attacked Republicans for placing blame on monetary policy, not the culture of supervisory laxity he details with various quotes from Trump Administration officials. Still, the panel’s legislative agenda seems limited to the executive-clawback measure we projected as the most likely outcome immediately after the mid-March failures (see Client Report REFORM218). Sen. John Kennedy (R-LA) countered that Vice Chairman Barr’s attribution of blame to Randy Quarles is the Fed coming up with a similarly-lame excuse for its recent failings.

REFORM226.pdf…

16 05, 2023

REFORM224

Max Camateros-Mann2023-05-16T17:34:14-04:00May 16th, 2023|5- Client Report|

Fed, FDIC Stand Their Ground Under Withering GOP Assault

In their first appearance following the reports on recent failures, FRB Vice Chairman Barr and FDIC Chairman Gruenberg were harshly criticized by Republicans for both the bank failures and recommended remedies. HFSC Chairman McHenry (R-NC) blamed the Fed for faulty monetary policy that led to inflation and unduly quick rate hikes that endangered financial stability as well as lax supervision that missed glaring failures at SVB, SBNY, and First Republic. Mr. McHenry was unconvinced by Vice Chair Barr’s defense of the reports finding that Fed supervision had undergone a “cultural” shift under Vice Chair Quarles; Mr. Barr defended the finding based on interviews with the San Francisco Fed’s staff. Democrats fired back, with Ranking Member Waters (R-CA) arguing that Republicans were politicizing consideration of essential supervisory and regulatory reforms

REFORM224.pdf…

1 05, 2023

REFORM222

Max Camateros-Mann2023-05-01T15:18:42-04:00May 1st, 2023|5- Client Report|

FedFin Assessment: FDIC Blames Signature Governance, Clarifies Failure Scenario

In this report, we build on our assessment earlier today of the Fed’s SVB autopsy (see Client Report REFORM221) with an assessment of the FDIC’s self-review of Signature’s failure. As noted on Friday, the FDIC confines this report to Signature’s supervision; a separate report will address policy recommendations. Although the analysis has some findings in common with the Fed’s SVB assessment with regard to matters such as supervisors’ failure to keep up with a fast-growing bank, the FDIC principally focuses on key risk indicators at the bank rather than supervisory shortcomings.

REFORM222.pdf…

28 04, 2023

Al050123

Max Camateros-Mann2023-04-28T17:19:44-04:00April 28th, 2023|3- This Week|

Report Cards: One B, One C, One D, And One Pass

As promised at recent hearings (see Client Report REFORM218), the Fed and FDIC released their internal reports on recent bank failures even as the GAO took them both on in a scathing report on both SVB and Signature’s demise.

Al050123.pdf…

3 04, 2023

Al040323

Max Camateros-Mann2023-04-03T11:02:55-04:00April 3rd, 2023|3- This Week|

Ready for a Recess?

We certainly are after the last three weeks! But, while Congress may be away until the middle of April, the FRB and FDIC will be hard at work writing reports that, for all their promised rigor, are likely to target specific failings at individual offices for the “idiosyncratic” risks and super-bad management that the agencies believe were largely the reason for SVB, Signature, and Silvergate’s demise. Following the White House’s lead, the agencies in concert with the OCC will also lay the groundwork for rapid-fire action on a raft of rules as soon as these reports are released.

Al040323.pdf…

28 03, 2023

REFORM217

William Cross2023-03-28T16:28:44-04:00March 28th, 2023|5- Client Report|

Senate Banking Demands Supervisory Accountability, Transparency, Reform

Today’s Senate Banking hearing was extremely well-attended by Senators on both sides of the aisle clearly looking first to understand what precipitated recent bank failures, who is to blame, and what should be done next. Republicans argued that current law gives the Fed considerable discretion without the need for statutory change. Although FRB Vice Chairman Barr initially sought to emphasize the need for new rules without blaming old ones, he ultimately admitted that the Fed indeed could and can govern risky banking organizations regardless of size.

REFORM217.pdf…

28 03, 2023

FedFin on: Senate Banking Demands Supervisory Accountability, Transparency, Reform

Arezou Rafikian2023-04-03T12:47:49-04:00March 28th, 2023|The Vault|

Today’s Senate Banking hearing was extremely well-attended by senators on both sides of the aisle clearly looking first to understand what precipitated recent bank failures, who is to blame, and what should be done next. Republicans argued that current law gives the Fed considerable discretion without the need for statutory change. Although FRB Vice Chairman Barr initially sought to emphasize the need for new rules without blaming old ones, he ultimately admitted that the Fed indeed could and can govern risky banking organizations regardless of size….

The full report is available to retainer clients. To find out how you can sign up for the service, click here and here.…

16 11, 2021

Daily111621

Arezou Rafikian2023-05-26T10:56:42-04:00November 16th, 2021|2- Daily Briefing|

Basel Proposes Global Climate-risk Management, Supervision Principles
As anticipated, the Basel Committee today proposed climate-risk management and supervision principles sure to guide both the Fed and OCC, even in just proposed form, as the U.S. agencies finalize near-term U.S. guidance in this high-priority arena.

FRB-NY Staff: U.S. Banks Now Even More Resilient
A new post from the Federal Reserve Bank of New York’s blog assesses bank resilience through the pandemic, concluding that large banks are even more resilient now than before thanks to post-2008 rules and post-2020 market backstops.

HFSC Republicans Condition CBDC on Stablecoin, Private Sector
HFSC Republicans have now laid out their principles for any U.S. CBDC, demanding that any Fed-issued CBDC maintain the U.S. Dollar’s reserve currency status and the U.S. payment system’s preeminence.

Senate GOP Tackles USPS Banking Pilot Program
Senate Banking Ranking Member Toomey (R-PA) today described postal banking as about the worst possible idea. Joined by other Republicans, Mr. Toomey wrote to the Postmaster General, questioning USPS authority to offer its recent pilot and challenging its mission-relevance.

CFPB Plans HMDA-Data Do-Over
Reflecting the President’s executive order on racial equity, the CFPB has now accelerated its fair-lending efforts with a request for views on how best to retool HMDA to better prevent mortgage discrimination.

FRB Presidents: Fund-Access, Financial-Literacy Improvements Needed
At today’s racism and the economy virtual event hosted by the Minneapolis Fed, FRB Atlanta President Bostic highlighted work by his Reserve Bank’s Special Committee on Payments Inclusion to show the Fed’s dedication in this …